Research Topics: Performance Of Malaysian SMEs

Factor’s influencing the Performance of Malaysian SMEs in the coating industry

Factor’s influencing the Performance of Malaysian SMEs in the coating industry     Introduction   Small and medium-size enterprises play crucial role in achieving Malaysia’s aspiration to become fully developed nation such as the manufacturing sector is expected to spearhead the drive to fulfill this vision. Malaysian government is constantly trying to promote and upgrade Malaysian SMEs to provide competitive industry for the success of SME establishments in Malaysia. The contribution of Malaysian SMEs to the total value is seen as bottleneck in achieving the rapid industrialization of the nation. According to Cabbar (2000), because of the vibrant and prolific description of Malaysia SMEs, there contributed to the expansion of the Malaysia’s economy and also very successful in Malaysia social life as well. Various global research and analysis have shown that Malaysia SMEs need management skills, information way in systems, Malaysia’s industrial base of assembly system to be upgraded, beside their economic needs to be met (Cabbar, 2000). The upgrading of the technological capabilities of Malaysian SMEs, through sophisticated technology, effective way to get better productivity and competitiveness, in spite of accessibility of government support programs, the usefulness of technology adoption among SMEs is an issue of great concern to the Malaysian government (Cabbar, 2000).   Discussion: Several Factors affecting SME performance in Malaysia   The growth in furniture market   The enlargement in furniture market exaggerated related industries such as the wood coating industry in Malaysia. In order to contend with the manufacturer from Vietnam, manufacturers in Malaysia are required to lessen their prices to make certain client dependability. Since coatings account for roughly 10 percent of the ending charge, furnishing manufacturer consistently expect coating suppliers to contribute to the weight alike as combined responsibility is essential in tackling competition from budding markets. The wood coating market in Malaysia was predictable at $ 69 million in the year 2005 and is anticipated to grow at a CAGR of four percent until the year of 2007.  Thus, the descending price force from the resin suppliers, uphill price stress from furniture manufacturers and price sensitive Malaysia’s coating market windswept the profit margins of many coating companies. Some of the companies such as Mirotone suffered huge losses in 2005, many coatings companies were incapable to carry on productivity in a powerfully spirited market and closed down as better outcome.   Prices of rubber wood   The rise in prices of Malaysia rubber wood, the principal source of unprocessed material for the furniture commerce, is expected to impact the coatings industry as well. Rising synthetic Malaysia rubber prices, which is derivative of crude oil, disrupted the supply demand balance. Rubber latex producers in Malaysia continued to use the rubber wood plantation to extract latex to bridge the demand and price gap.  There was then shortage of rubber wood is expected to impact the furniture industry and in the process, the coatings industry. In order to sustain profitability in the future, the coating manufacturers in Malaysia have to actively invest in the overseas markets in order to service their customers who are moving to emerging markets such as China and Vietnam. Thus, Dehfu has a manufacturing place in China and cater to the needs of its customers in Malaysia and some others.     Supply and customer based issues   The strategy not only ensures Malaysia’s customer royalty but also helps companies to tap the potential that lies in these emerging markets. The coating suppliers have to strike the right balance between price and affordability. Focus on dependable supply of Malaysia’s quality products is important but the coating products have to come at an affordable price. Most of the furniture manufacturers in Malaysia are small to medium scale manufacturers and consumer awareness is relatively poor. Most of the furniture manufacturers located and operating in Malaysia do follow specifications provided by out of the country customers and coating suppliers have to make conscious effort to understand the needs of Malaysia based customers’ and the like. The coating industry in Malaysia is still outperforming the financial system and growth in furniture export has been expected to drive the market for wood coatings in the coming years of trade zone.   Malaysia is trying to branch out its furniture export base in order to reduce its dependence on a single economy. The government of Malaysia imposed ban on rubber wood exports in order to help the domestic manufacturers. Malaysia’s wood furniture industry is heavily dependant on rubber wood as 80 percent of the wooden furniture produced is from rubber wood. Rubber wood in combination with veneers and others account for the remaining 20 percent of furniture production. The ban is expected to augur well for the furniture industry, given some shortage in supply of rubber wood.   Price sensitivity of coatings market   The coating market in Malaysia has been price sensitive and domestic manufacturers compete with bigger suppliers by competitively pricing their products. Rising raw material costs have forced these manufacturers to increase their prices henceforth, Malaysia customers have moved to bigger international suppliers who supply quality products. Some of the companies either lost customers or were unable to cope up with the rising raw material costs and closed down in time. The much needed investments in research and development have also dwindled and the shift to ecology friendly technologies such as polyurethane and UV/water based coating systems has been projected to happen within a slower pace for Malaysia style.   In addition, Malaysia shortage of rubber wood has widened the supply and demand gap and has forced Malaysia furniture manufacturers to look at the overseas markets to sustain profitability.  The manufacturers have moved to markets such as Vietnam and China and some of Malaysia’s coating manufacturers are unable to invest in overseas operation due to several periphery chomp. Malaysia’s wood coating market is enormously disjointed and there are more than 40 suppliers of wood coating in Malaysia, the manufacturers were accounted for almost 50 percent of the Malaysia market in the year 2005 and have established themselves well in the Malaysian market stature.   Situation of SME companies   Amicably, Valspar and Akzo have regional presence in Asia and cater to the needs of the Southeast Asian customers from Malaysia. The country houses the biggest production plant of Valspar in the South Asian region and acts as the manufacturing hub for Valspar in the region. The companies are mounting its share in the fast emerging Vietnamese market but Malaysia’s market is an imperative one as it has a well-built foothold there. Syncoates is a familial supplier and is investing in overseas markets to boost profitability. Though a greater part of the company’s sales are from the Malaysian market, the company has taken the right move to reduce over dependence on a single market. Akzo Nobel is another leading wood coating supplier in Malaysia and has strong attendance in China and other Asian countries.   The company’s performance in Malaysia’s market during 2005 was prominent as it gained some innovative customers and reported good profit margins amidst dull market conditions. Dehfu, realizing the need to move to budding markets, started a facility in China and its Chinese operation has aided in sustaining the profit margins. Apart from the these four companies, the rest of the suppliers are dependant on Malaysia’s market to a large extent and have been adversely impacted by the rising raw material prices and growing competition from China and Vietnam. Thus, Nitrocellulose lacquers still control the market and accounted for almost 55 percent of the wood coating market in Malaysia during 2005.   SME roles SMEs have been in performance roles such as providing job opportunities, income distribution through business opportunities, rural development, increase investments and development of entrepreneurship (Kotey and Meredith, 1997). At the similar point, Malaysia’s small firms with inadequate resources will be expected to perceive Malaysia’s business environment as being unlike from that of large firm with more Malaysia resources and it is also likely to feature diverse environment pressures with regard to Malaysia market competitiveness (Gyampah et al, 2001). Some authors believe that the performance of Malaysia SMEs is contributed by many factors such as interior and exterior to Malaysia SMEs themselves (Kotey and Meredith, 1997; Pearce and Robinson, 2002). However, there was no inclusive study on factors that contribute to the development and performance of the SMEs. There is only small number of researches in budding nations (Bjerke, 2000). In the last two decades, it seems that researches on SMEs focus on Malaysia government role and policy in developing SMEs (Ainuddin and Saodah, 2001). In year 2000, Hashim (2000) used strategic model approach to explain the factors contribute to the performance of SMEs. According to the model, there are three strategic factors which determine business performance; Malaysia entrepreneurship orientation, organisation structure and external business environment. The integration of certain factors did significantly influent business performance of Malaysia’s coating industry. There can have prepared representation about Malaysia SME performance, representation explain that Malaysia’s financial performance of SMEs is influenced by management practice as interior factor and by market as exterior factor, both the variables which influent financial performance in Malaysia were also influenced by characteristics of SME manager being one forebear variable.  In Malaysia coatings industry particularly in small and medium enterprises, there can be several factors that significantly affect Malaysia performance, the part has illustrated some roles that were related to Malaysia industry research base.  Moreover, the presentation covers the idea of Malaysia research regarding positive performance of Malaysian small and medium enterprises. In Malaysia’s mechanic structure, next of kin outline is not stretchy and proper, in Malaysia there can be clear division of work and the decision making were being centralised. In the organic structure, Malaysia’s relationship pattern is moderately casual, the decision making involve subordinate and relative flexible with Malaysia regulations. The understanding of the needed factors influencing the performance of Malaysia’s SMEs will help toward better planning to cater for the needs of Malaysia grounded SMEs. The choice of narrative can be limited only to those that have vital contribution about the above factors influencing performance of small and medium industries located in Malaysia. Thus, in describing such productivity comparison among SME’s and large firms in Malaysia, there can indicate that the level of production presents the finding from series of studies that employ large sets of facts to assess the source of productivity growth at the Malaysia coating industry level. In addition, there discusses ample findings to link them with theories about how and why Malaysia firms perform in dissimilar way. There have been increases in Malaysia on the past years but with boundary. Furthermore, income of Malaysians depend on productivity and adhere accompanied by SME firms within same industry as smaller firms can be found covering behind of its productivity in the UK but it does not mean that small and medium enterprises do not contribute to the Malaysian’s productivity growth. Henceforth, Malaysia SMEs may possibly have few capital assets as compared to larger firms as the SMEs pay subordinate earnings than larger firms and reflects that, smaller firms may be late in line for well accomplished work and Malaysia based SMEs may discover process towards the low end of productivity scale. The coating industry factors in Malaysia can possibly create the institutional and systematic conditions to support upgrading of Malaysia firm level capabilities, diversification and creation of innovative Malaysia firm. This is showing how much emphasis the Malaysian Government has put on the development of SMEs. Despite the quantity of efforts spent by Malaysia government, there has been very little study aimed at understanding the factors that have significant impact on SMEs performance in Malaysia and further ensure the survival and sustainability of these SMEs in the long run.  The volume of Malaysia based products or services produced tended to dictate the size of operational scale. Small-scale operations tended to be less specialised, had fewer levels of management authority and a small span of control for supervisors and managers. The type of Malaysian based firm tended to utilise flexible teams with a range of roles, and there was no large gap in status and authority between those doing the work and those managing and supervising. The SMEs functioned around the skills and expertise of the employees, with harmonious relations and high levels of verbal communication being used to coordinate activity far less of the ‘brainwork’ of operations had been separated out and delegated to staff experts. Malaysia workers’ were given more independence and responsibility for organising work procedures, processes and systems. Malaysia SMEs although greatly varying in size, growth rates and activities, due to its inherent uniqueness are all united in their goal towards profitability and efficient asset management. Small to medium Malaysia based firms’ necessitate mastery in accounting in order to manage and control its assets.  The SMEs don’t pay much attention to Malaysia Fixed Asset Management though due to the foreseen added expenditures of Research and Development among other backdoor office functions.  SMEs are limited in funds in nature due to their small size and as such they are compelled to employ traditional spreadsheets than software that will cost them more. Conclusion Malaysian wood coating market is anticipated to observe sensible growth in the coming years. In Malaysia, there were also cheap labor and abundant natural resources are expected to facilitate the shift to coating markets as same with countries China and Vietnam and therefore, Malaysia’s coating industry manufacturers may lose some customers as an outcome of the latter. Malaysia’s coating manufacturers have to move emerging markets along with their customers and in the process of gaining fresh customers in Malaysia. Some of Malaysia coatings manufacturers are looking at the Indian market since huge potential exist in the Indian market.  Malaysia’s industrial wood coatings market is still in promising stage and domestic furniture demand are expected to grow in line with Malaysia’s economic growth. The coating manufacturers have to capitalize on the gains as an early move on SME advantage and should channel Malaysia based investments toward other region. Indeed, through regulatory principles in Malaysia which are not as rigorous in Korea or China, coating manufacturers have to invest in ecological friendly technology to optimize production costs and build solid platform for the future of Malaysia coating industry. Some of Malaysia coatings manufacturers simply supply coatings to some customers and are unaware of further SME developments in Malaysia coating industry. Lastly, coatings manufacturers in Malaysia should go in one step forward and understand the needs of Malaysia customers of coating manufacturers and supply products consequently. Since Malaysia coating manufacturers have good quality bargaining power, it can be imperative that coating manufacturers maintain the rapport with the customers by supplying quality products every time. Malaysian government has to launch several initiatives in order to facilitate and help expansion of SMEs for good performance tenets.     References Ainuddin, R.A and Saodah H.J. (2001). “Characteristics of Entrepreneur-Owned Companies in Malaysia”. The 4th   Asian Academy of Management (AAM) Conference 2001 Proceedings (Volume 1), Johor Bahru, Malaysia, pp 133-140 Bjerke, B.V. (2000). “A Typified, Culture-Based,   Interpretation of Management of SMEs in Southeast Asia”, Asia Pacific Journal of Management, Vol 17, pp. 103-132 Cabbar, Y. (2000). Black-Sea Economic Cooperation Workshop on    Internet, E-commerce and SMEs. Speech delivered at the Heaquarters of the BSEC Permanent International Secretariat. Available at [www.unce.org] Gyampah KA and SS Boye (2001). “Operations Strategy in an Emerging Economy: The case of the Ghanaian Manufacturing Industry”, Journal of Operations Management, Vol 19, pp 59-79 Hashim, M.K. (2000). “A Proposed Strategic Framework for SMEs’ Success”, Malaysian Management Review, Vol 35, No.2, pp32-43 Kotey, B and Meredith, G.G. (1997). “Relationship among Owner/Manager Personal Values, Business Strategies and Enterprise Performance”, Journal of Small Business Management, Vol 37, pp 37-62 Pearce II, J.A and Robinson Jr, R.B. (2000). “Strategic Management: Formulation, Implementation and Control”, Richard D Irwin Inc., USA Credit:ivythesis.typepad.com

Factor’s influencing the Performance of Malaysian SMEs in the coating industry

Factor’s influencing the Performance of Malaysian SMEs in the coating industry Introduction Small and medium-size en...